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INDIA, THE MULTI-FIBRE ARRANGEMENT AND URAGUAY ROUND.
Abstract
For more than 27 years, international trade in textiles has enjoyed exceptional treatment. The Multi-Fibre Arrangement (MFA), has provided the framework for "expansion of international trade in textiles in an orderly manner'. The arrangement benefits all parties. Established exporters and newcomers are guaranteed market shares in importing developed countries. It is also argued that appropriation of quota rents and increases in unit value of exports compensates the exporting countries for possible loss of higher market shares under the arrangement. However, it is now increasingly evident: that rents may be partially absorbed in importing countries; that quotas may become binding at less than 100% utilization; that capacity expansion and new investment may be adversely affected by the presence of quotas which create demand-pessimism in exporting countries. These issues have hitherto been largely ignored in the literature. This paper attempts to fill a gap by examining the impact of the MFA on the evolution and performance of India's garment industry. The industry has grown entirely on the basis of export demand. The next section describes the evolution of the garment industry in India and brings out the characteristic features of its organization and production structure. The relationship between the garment industry and the formal and informal segments of the cotton weaving and the man-made fiber industry is also discussed. The third section analyzes the volume, composition and direction of garment exports from India. The fourth section briefly describes the working of the quota allocation system in India. The actual effect of this system is also discussed. The last section combines our findings regarding the impact of the MFA on the Indian garment industry. -from Authors
... In some instances, foreign suppliers may have sufficient information to utilize 100 percent of the available quotas. In other cases, current information on quota utilization 9 For example, Indian textile and apparel producers' ability (or lack thereof) to effectively utilize available quotas is discussed in Kumar and Khanna (1990). Also, see discussion in Trela and Whalley (1990, p. 1193, fn. 7). 10 Given these uncertainties, the ITC (1993) estimated two sets of export tax equivalents based on the assumption that MFA quotas were binding at utilization rates of 80 percent or greater and 90 percent or greater. ...
... S. import data 17 U.S. imports reported on the basis of customs value exclude insurance, freight, and other charges. 18 In earlier studies, prices for quotas traded in Taiwan were available. For example, Hamilton (1988) used Hong Kong and Taiwan quota prices to estimate the effects of the MFA on U.S. imports from Hong Kong, Taiwan, and South Korea. Kumar and Khanna (1990) used quota prices collected through surveys and, to a limited extent, from the Indian Government to estimate ad valorem tariff equivalents faced by Indian exporters. 19 Data on current quota prices are collected by the Hong Kong Trade and Development Council. The quota prices used in this analysis were collected by private brokers and p ...
... . Since the late 1980s, some 60-65% of quota licenses was allocated to firms based on their past performance. According to KUMAR andKHANNA [1990], these licenses were freely transferable and an active secondary market existed in which the licenses were bought and sold. In 1991, the rules were changed to allow only permanent transfers. ...
This paper considers the ramifications of quota subcategorization, a practice which characterizes India's system of allocating Multi-Fibre Arrangement (MFA) licenses. We compare the justifications commonly given for this practice with the optimal policies to attain those objectives. /// Dans cet article nous considérons les ramifications de la subdivision des quotas, une pratique qui caractérise le système d'allocation des licences dans le cadre du Multi-Fibre Arrangement (MFA) en Inde. Nous comparons les justifications habituelles données pour cette pratique avec les politiques optimales nécessaires pour parvenir aux mêmes objectifs.
Freedom of association and living wages are two fundamental components of social upgrading in global value chains. However, in the apparel sector, the power afforded to lead firms due to industry consolidation has resulted in a squeeze on suppliers and on workers that is reflected in terms of low wages and increased worker rights violations. This squeeze down the supply chain has been exacerbated by the Covid-19 pandemic, with many lead firms abruptly cancelling orders without paying supplier factories for their orders. Millions of workers were adversely affected through lost income, lost jobs, and increased food insecurity. The sourcing squeeze and the Covid-19 crisis thus illustrate decent work governance gaps in global value chains. This chapter argues that these gaps can be addressed via a transformation of the institutional context in which GVCs operate. This involves collective bargaining and other binding agreements and more effective public governance. These arguments are illustrated through the country case study of India.
Trade in manufactured products has been extremely important for the industrialized countries, both as exporters and importers (although with significant variation for them as importers, as was demonstrated in chapter 5). At the same time, these industrialized countries have become particularly important as markets for the manufactured goods that have been produced in the developing world. The industrialized countries have been the key markets for the manufactured goods that have been essential for the economic and developmental advances of the Newly Industrializing Countries (NICs). Without access to prosperous markets in the developed world, it would have been extremely difficult for these countries to have grown through the expansion of export industries, and it would be extremely difficult for additional countries to follow the NIC path of export-led growth without such markets. The markets in the developing countries generally lack sufficient size or domestic demand to foster export-led growth elsewhere in the developing world. Further, many developing countries have similar rather than complementary economies, limiting even more export opportunities to each other. The opportunities for the developing world to utilize comparative advantage in manufactured goods consequently depends principally on access to the large markets in the industrialized countries, markets in which there also have been better chances of complementary economic activity rather than competitive activity.
To what extent has the Multi-Fibre Arrangement (MFA) restricted the less developed countries (LDCs), and Central and Eastern European countries (CEECs) exports of textiles and clothing to the European Union (EU), and to what extent will it do so in the future?1
Major disturbances in their global environment such as the world-wide recession in the early 1980s, in increasing protectionism in the EC and the US, large exchange rate fluctuations, high and volatile real interest rates and commodity price shocks have not prevented developing Asian countries from accelerating economic and social progress in the 1980s. Real per capital income grew much faster than in the 1970s both in South and East Asia, and the income gap between the Asia Pacific region and industrialised countries narrowed substantially (Table 1). Projections of e.g. the World Bank [1990] and the Nomura Research Institute [Kwan, 1990] indicate that these favourable trends are likely to be sustainable throughout the 1990s. Estimates of per capita income growth range from 5 to 7 per cent for East and Southeast Asia and around 3 per cent for South Asia. The good prospects for the coming decade are, nonetheless, overshadowed by rising uncertainties and concerns about persistent and severe trade imbalances, the emergence of trading blocs and the future destiny of the former socialist economies.
Investigates the main instruments and suggested parameters of the two leading approaches to phasing out the MFA. We make an attempt to depict the changes in the restrictions facing individual developing countries which would result from the shifts implied by the current proposal. While not attempting to make a thorough evaluation of the alternative proposals, we do consider their feasibility from a pragmatic point of view, and their acceptability to the negotiating parties. Section 2 gives a synopsis of the phaseout proposals tabled by developed and developing countries. In section 3, the historical MFA quota growth in the EC and the US is analyzed. Section 4 depicts a phaseout within the framework of the MFA which relies on accelerated quota growth based on the historical record. Section 5 deals with a phaseout based on global quotas along the lines of the US proposal. Finally, section 6 gives the conclusions of the paper. -from Authors
The Agreement on Textiles and Clothing will abolish all quota restrictions in trade in textiles and clothing by the year 2005. Dismantling the quota regime represents both an opportunity (for developing countries to expand exports) and a threat (because quotas will no longer guarantee markets and even the domestic market will be open to competition). Data about the real burden imposed by distorting but nontransparent policies under the quota regime are inadequate, so the authors interviewed traders in Delhi and Bombay about quota rents. They provide comprehensive estimates of the magnitude of the implicit export taxes resulting from the labyrinth of quotas imposed under the WTO Agreement on Textiles and Clothing. Using the concept of an export tax equivalent (or ETE), they assess how much exports are restricted. The international trade regime in textiles and clothing imposes a substantial tax equivalent on Indian exports. Between 1993 and 1997, ETEs for garment exports to the United States were roughly double those for the European Union. The ETEs for the United States declined 1996, which could be a warning signal that India faces increasing competition from NAFTA-empowered Mexico. From India's viewpoint, the European Union is ahead of the United States in dismantling the quota regime - and in not restricting India cotton (garment) exports (where India has a comparative advantage) more than synthetics. India's strengths in this sector lie in natural resources and factor endowments - raw cotton and cheap labor. The Indian garment industry's decentralized production structure - subcontracting, which is low risk and low capital - has served the industry well but has executed Indian products from the mass market for clothing which demands consistent quality for large volumes of a single item. Growth in Indian exports may require a shift to an assembly-line, factory-type system. This would probably require: a) No longer restricting garment production to the small-scale sector (and ending other anachronistic policies). b) Making labor policy more flexible. c) Ending the policy bias against synthetic fibers. d) Reducing transaction costs for exports.
Lawrence R. Klein pioneered the work on aggregation, in particular in production functions, in the 1940s. He paved the way for researchers to establish the conditions under which a series of micro production functions can be aggregated so as to yield an aggregate production function. This work is fundamental in order to establish the legitimacy of theoretical (neoclassical) growth models and empirical work in this area (e.g., growth accounting exercises, econometric estimation of aggregate production functions). This is because these models depend on the assumption that the technology of an economy can be represented by an aggregate production function, i.e., that the aggregate production function exists. However, without proper aggregation one cannot interpret the properties an aggregate production function. The aggregation literature showed that the conditions under which micro production functions can be aggregated so as to yield an aggregate production function are so stringent that it is difficult to believe that actual economies can satisfy them. These results question the legitimacy of growth models and their policy implications. Scientifi c work cannot proceed as if production functions existed. For this reason, the profession should pause before continuing to do theoretical and applied work with no sound foundations and dedicate some time to studying other approaches to estimating the impact of economic policies in order to understand what questions can legitimately be posed to the empirical aggregate data. Lawrence R. Klein fue uno de los pioneros del campo de la agregaci�n, en particular en el �rea de las funciones de producci�n, durante la d�cada de los 40. Sus contribuciones ayudaron a defi nir el problema de la agregaci�n para que investigadores posteriores establecieran formalmente las condiciones formales bajo las que funciones de producci�n microecon�micas con propiedades neocl�sicas pudieran ser agregadas con el fi n de generar una funci�n
Two approaches took the lead in the negotiations to dismantle the Multi-Fibre Arrangement (MFA): (a) a phaseout with the framework of the MFA, proposed by developing countries, the European Community, Japan, and the Nordic countries; and (b) a new transitional structure relying on global quotas with country allotments for current quota holders, suggested by the United States and Canada. Under both scenarios, accelerated quota growth is the main device for phaseout. Country quotas, in the first approach, and global quotas in the second, will have to expand in such a way to avoid a"shock"when they are abolished at the end of the phaseout. The second most important element in the phaseout proposals, besides expanding quotas and abolishing them at the end of the phaseout period, is scrapping them along the way according to some predetermined criteria and scheme. In the proposals, this is defined in terms of country characteristics, specific products, product characteristics, or some criterion pertaining to the historical record, such a quota use. The historical record reveals that growth in highly utilized quotas was significantly lower compared with unfilled quotas. There is one important virtue in a phaseout based on the current structure of the MFA. Not only are the mechanisms in place familiar to the negotiating parties, but so are the magnitudes of most of the parameters: current quota levels, quota growth rates over the last few years, and their use ratios.
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